Point72 just discovered that top commodities traders can be hard to please
Last November, Steve Cohen, the top trader who runs hedge fund Point72, reportedly told investors that he was thinking of setting up a commodities business. Two months later, Reuters reported that Point72 was hiring Ryan Sheffler, a trader from "commodities merchant" Castleton Commodities. Sheffler was supposed to be joining Point72 as a natural gas portfolio manager and was due to arrive imminently.
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That's not going to happen. Today, With Intelligence is reporting that Sheffler is off to Millennium instead. We haven't confirmed this with Millennium or Scheffler, but Point72 is declining to comment. He will not be Millennium's only ex-Castleton hire: Fernando Ortiz, another natural gas trader, left Castleton for the hedge fund in March.
Point72 was presumably gazumped. But Sheffler is not the only commodities trading professional to be hard to pin down. Headhunters in the sector say the best traders are increasingly fussy about where they work and that in many cases, hedge funds are not their first choice.
"It's increasingly desirable to have exposure to the underlying physical product," says Ross Gregory, partner and head of commodities at Omerta Group, a Kingsley Gate company, in New York. "There's been a trend for commodities hedge fund traders who don't have physicals exposure or that edge to go back to commodity merchants or major trading houses."
Ironically, Millennium doesn't have a physical operation, but it does have Anthony Dewell, a former Goldman Sachs commodities trader who joined Millennium in 2022. Dewell is one of the most respected traders in the market. Sheffler was a Goldman power trader before he joined Castleton.
Point72, by comparison, has traditionally been an equities-focused fund. Although Cohen is a brilliant trader, it's conceivable that this could scare commodities professionals away. Volatility can be high in commodities and funds that won't accommodate this can be bad for careers. "There are some hedge funds that are very good at commodities, but if you join the wrong place it can go very badly for you," says another headhunter, asking to remain anonymous. "If you arrived in March and were on the wrong side of the Iran war, it would be difficult at the wrong fund."
Citadel's commodities business is the best established and most profitable. As the Financial Times reported in June, Citadel owns actual natural gas drilling rigs and other elements of the commodity supply chain through Citadel Energy Marketing. Jane Street is also the quiet owner of a US physical natural gas business. Last October, hedge fund Jain Global acquired Anahau Energy, a US natural gas trading operation. Any exposure to physical trading is better than none.
It's not clear why Sheffler didn't join Point72, but it's conceivable that the lack of a physicals business was on his mind. He may also have noted the swift comings and goings of traders at other less experienced commodities hedge funds like Verition and Brevan Howard.
Peter Henry, a New York-based commodities headhunter at HW Anderson, says hedge funds themselves are also becoming more discerning when they recruit. "Hedge funds are trying to get a feel for trading style, the risk of that particular trader's book and what it does to the broader portfolio before they bring them on board," says Anderson.
They will often do this using a rubric says Henry. These are time consuming hypotheticals in which traders provide examples of high conviction, high risk-on positions along with lower conviction low risk positions. "Not every fund does it, but rubrics are becoming popular in commodities," he says.
Assembling a rubric is time consuming. Henry says traders see it as mitigating their risk of being stopped out when they join new funds. It's not clear whether Sheffler assembled one for Point72.
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